194419311942 CHAPTER 2 The Creation of Companhia Vale do Rio Doce 2.1 Born with a built-in expiration date Economic instability would also result in the creation of a new 41 currency, the cruzeiro, in October of the same year. It was the first At the moment when President Getúlio Vargas picked up his change to Brazil’s currency since independence in 1822. pen to sign Decree-Law 4,352,1 establishing Companhia Vale do Rio In 1942, Brazil – where the song “Ai que saudades da Amélia,” by Doce, on June 1, 1942, it is possible that he did not realize the true Ataulfo Alves and Mário Lago, had become an instant hit – needed importance of this act for the history of Brazil – and specifically for to find its way. The country needed money, it needed to nationalize the future of mining. Vale – alongside the National Steel Company its ore and, according to its American commercial partners, it (Companhia Siderúrgica Nacional, or CSN), created one year needed to join the war. Companhia Vale do Rio Doce, a company before – was more than just a pawn on the chessboard of wartime capable of expanding the supply of iron to the United States’ arms international relations. In a short time, it would gain a life of its industry, was fundamental. own and grow into one of the country’s biggest companies. Established by incorporating two existing companies – Companhia On June 1, 1942, Brazil was immersed in an institutional crisis Brasileira de Mineração e Siderurgia S. A., and Itabira de Mineração centered on the country’s decision on whether to enter the Second S. A. – the new company was also tasked with maintaining, using World War. Twenty days before, the merchant vessel Comandante and expanding the Vitória-Minas Railroad (EFVM). It was also given Lira had been torpedoed in Brazilian waters between Ceará and Rio Cauê Mine – minimally exploited during Percival Farquhar’s time as Grande do Norte, in an attack attributed to German submarines. In president of the Itabira Iron Ore Company – which would become a the days that followed, another three Brazilian ships had the same kind of symbol of Vale’s early days. destiny – the last of them, Alegrete, on June 1 precisely.2 In the article “O Brasil e seu minério de ferro” (“Brazil and its On the streets of Rio de Janeiro, then the capital of the Republic, the iron ore”), published in Observador Econômico e Financeiro in 1945, people began persecuting German immigrants, defacing their homes soon after the beginning of mining activity, Cauê was rated a high- with graffiti and throwing stones at their commercial establishments.3 productivity mine. “It is known that Cauê’s ore is found at the surface of the ground, and every blast dislodges 4,000 metric tons.” The first block of rock was removed by Vale on October 24, 1944. 1 - This decree expropriated the companies Companhia Brasileira de Mineração e It was the start of a project that would go beyond the mine itself Siderurgia S. A. and Itabira de Mineração S. A., as well as the Vitória-Minas Railroad and its entire track, buildings and rolling stock. It also established the articles of and start to determine the history of mining in Brazil. incorporation of the new company, Companhia Vale do Rio Doce S.A. The decree was As will be seen in due course, CVRD was the result of the signed by President Getúlio Vargas and ministers Artur de Souza Costa, Vasco Leitão so-called Washington Agreements, which provided for the da Cunha, João de Mendonça Lima, Oswaldo Aranha and Alexandre Marcondes Filho (available at: <http://www.camara.gov.br/internet/InfDoc/novoconteudo/legislacao/ participation of foreigners in strategic leadership positions at the republica/Leis1942vIIp245/pdf19.pdf>). CVRD’s definitive constitutional assembly took company. The first superintendent to be appointed, Israel Pinheiro, place on January 11, 1943. See Pimenta, Dermeval, A Vale do Rio Doce e sua história. Belo had been in Washington at the signing of the agreements. In his Horizonte: Editora Vega, 1981, p. 111. first act for the Vitória-Minas Railroad, Pinheiro asked to borrow a 2 - See Ferraz, Francisco César. Os brasileiros e a Segunda Guerra Mundial. Rio de Janeiro: Jorge Zahar Editor Ltda., 2005. See also Sander, Roberto. O Brasil na mira de Hitler: a história do pair of scissors, cut off his shirt sleeves and said: “Now, all hands afundamento de navios brasileiros pelos nazistas. Rio de Janeiro: Editora Objetiva, 2007. on deck!” This phrase would be written on the pamphlets selling 3 - See Ferreira, Jorge & Delgado, Lucília de Almeida Neves (org.). O Brasil Republicano. shares in the company, and partially explains the company’s O tempo do nacional-estatismo: do início da década de 1930 ao apogeu do Estado Novo. Rio de record since then. Janeiro: Civilização Brasileira, 2007, vol. 2. Vale Our History Vale Our History Previous page: ore being extracted at Cauê Peak in Itabira, Minas Gerais, in 1944, and Decree-Law 4,352 establishing CVRD on June 1, 1942. To the left, from top to bottom: people celebrate the end of the Old Republic and the victory of the 1930 Revolution, and a paper factory in Petrópolis, Rio de Janeiro, signaling the start of the country’s industrialization. of July 17, and 20,799 of December 16 of the same year, which nationalization of mines and mineral deposits deemed essential to suspended all acts that implied the disposal of any mineral deposit.6 the country’s economic or military defense. The government’s interest in mining was also reflected in the The Code of 1934’s starting point was a distinction made administrative sphere. In the process of restructuring the Ministry between mineral deposits and mines. A deposit was considered to of Agriculture, Industry and Trade, the Directorate General of be the whole mass of mineral or fossil substances existing inside Mineral Production was created. Nearly one year later, in March or on the surface of the land that could be valuable to industry. In article 4 of the Statute to Establish Companhia Vale do Rio 1934, the National Mineral Production Department (DNPM) was Mines, on the other hand, were considered to be deposits in their Doce (an appendix to Decree-Law 4,352 of June 1, 1942), the following established in order to study all subjects concerning the country’s commercial sense: in other words, deposits themselves, plus their was written: “The company’s duration shall be 50 (fifty) years, mineral production and corresponding technical education, as well set of constituted property rights, the effects of exploration, and counting from the time of its constitutional assembly. However, the as subjects related to knowledge of the country’s geology and the also the ownership of the concession that represented them. general assembly reserves the right to deliberate at any time on the use of water to produce energy or for irrigation. For the purpose of harnessing deposits, the Code established extension of this period or the dissolution of the company before To complete this set of measures, on July 10, 1934, Decree 24,642 two different regimes. With regard to those already being mined the established term.” enacted the Mining Code. Alongside the Water Code, created on as of the publication date of the Code, it was determined that For 70 years, Vale, with the energy of a child, has been contradicting the same day, the Mining Code was the Provisional Government’s they could continue to be exploited, regardless of authorization or 42 the predictions of its own founding statute. most important contribution in terms of legal instruments for state concessions from the public authorities, provided that they were 43 intervention in the economy. Through it, the legal regime governing declared within a maximum period of one year, counting from mines instituted by the 1891 Constitution was substantially modified that same date. This declaration should state proof of the deposit’s – from then on, a fundamental distinction was established, for the existence, nature and conditions, as well as the extent of the 2.2 The Mining Codes of 1934 and 1940 purposes of mining, between ownership of the land and ownership property rights over it. Mineral substances used for construction of mineral deposits and other resources beneath the ground. did not require authorization or concessions. Their exploitation was When he took over as head of the Provisional Government on The new Code was composed of 95 articles, and its main reserved exclusively for the respective landowners, in accordance November 3, 1930, after the victory of the 1930 Revolution,4 Getúlio author was Domingos Fleury da Rocha, then director of the DNPM, with administrative regulations. Vargas began a widespread institutional reform to strengthen state supported by the Minister of Agriculture, Juarez Távora. Although it In relation to deposits that were known but not yet exploited intervention in the social and economic fields. The 1930 Revolution was signed on July 10, it was only published on July 23, days after as of the Code’s publication date, it was determined that they was an armed political movement led by the states of Minas Gerais, the passing of the 1934 Constitution, on July 16. The Constitution would continue to belong to landowners, but to exploit them, Paraíba and Rio Grande do Sul, which culminated in the end of gave legal support to the changes brought about by the Code, and they would require a concession from the government. In such the Old Republic. Among the novelties that came with the new the government became the main controller of the country’s policy cases, the landowners also had the preferential right to mine government was the popularization of a term until then little used for mineral prospecting and extraction.